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For those retired with a pension knowing what you know now if you had a choice between a pension and a 401k where you basically handle your own retirement funding which would you choose?
Pension, which both my wife and I have - defined benefit and protected against change by law. We also had 401Ks and anyone can have an IRA. And don't forget Social Security which we also benefit from. There are lots of options.
For those retired with a pension knowing what you know now if you had a choice between a pension and a 401k where you basically handle your own retirement funding which would you choose?
A reliable pension is much preferred, IMO. Managing cash/investments requires serious T&A under the best of circumstances and for those of my acquaintance in the non--pensioned cohort, it is an ongoing, very stressful situation. Unless one has multi-millions as a cushion against the inevitable surprises, it can be a daunting task.
I get involved by request because of my financial background with a number of family and friends in their money management considerations. It is obviously a very serious topic and one which ties them in knots of fear and trepidation.
A million "ain't what it used to be" spread over possibly 30+retirement years. More than a few folks are ill-prepared to comprehend even the basics of all the financial information thrown at them upon retirement. Reliable and unbiased investment advice is not easy to access and still requires a modicum of basic financial knowledge to understand what advisors are telling you.
Having a pile of cash certainly beats the alternative but it is far from being a simple situation for most folks. A secure pension makes life much less stressful. Note my emphasis on reliable & secure, those criteria are obviously critical going forward. The private annuity alternative has its own minefields and is not a simple option to evaluate.
The questionable financial situations of more than a few state/local governmental entities and some corporations make that a topic one needs to be very aware of in one's planning. Unfunded pension obligations are, and will continue to be, a very serious consideration for those in the retirement window.
There are more than a few circumstances where "take the cash and run" would be a better option. Whether cash in hand or a promised pension is indeed better is a complex topic. There is no perfect answer applicable as a generalization, it depends on the specifics of an individual's situation. In the not too distant future (if not now), I predict that this topic is going to be a major issue for many folks and a critical public policy crisis. JMO
Last edited by Pilgrim21784; 10-30-2011 at 08:34 AM..
Meh - this is a no-brainer. A defined pension with a COLA hands down. 401ks are means for employers to shed responsibility, legacy costs and improve their bottom lines.
As Pilgrim states, most retirees are ill-equipped to handle a portfolio. When SS and defined pension cover expenses with money left over, the worry is pretty much gone.
We have a pension with a COLA and lifetime medical - my husband is even reimbursed through his monthly pension check for his Medicare Part B deductible (or premium - not sure what they are called since I have a few years to go before I am on Medicare). What can I say - it is wonderful and comforting to have all this. I know that medical insurance can be the #1 biggest expense for retirees so having the great medical insurance is a life saver for us.
We have a pension with a COLA and lifetime medical - my husband is even reimbursed through his monthly pension check for his Medicare Part B deductible (or premium - not sure what they are called since I have a few years to go before I am on Medicare). What can I say - it is wonderful and comforting to have all this. I know that medical insurance can be the #1 biggest expense for retirees so having the great medical insurance is a life saver for us.
Sounds like CalPERS. My wife and I both benefit from the same arrangement and earned benefits. It's the Part B premium that's reimbursed and the supplement provided premium-free takes care of all the Medicare deductibles. It does make for for great peace of mind and financial security.
Pension, which both my wife and I have - defined benefit and protected against change by law. We also had 401Ks and anyone can have an IRA. And don't forget Social Security which we also benefit from. There are lots of options.
And you have all the legs of a good retirement covered.
For those retired with a pension knowing what you know now if you had a choice between a pension and a 401k where you basically handle your own retirement funding which would you choose?
We have both a pension and a 403B which is a non profit sector 401k. If I could only have one, I am not sure. Ten years ago I would have said pension but moving forward with the stress on government things are not as certain. Additionally the 403/401 is all mine and will be there as legacy money which beyond my spouse isn't possible with the pensions. My wife is in the same situation with a pension and 403B.
We have both a pension and a 403B which is a non profit sector 401k. If I could only have one, I am not sure. Ten years ago I would have said pension but moving forward with the stress on government things are not as certain. Additionally the 403/401 is all mine and will be there as legacy money which beyond my spouse isn't possible with the pensions. My wife is in the same situation with a pension and 403B.
Sounds like you have it well-covered too.
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